OMRI DAILY DIGEST
No. 175, 8 September 1995
JOINT MILITARY EXERCISE BEGINS IN SLOVAKIA. A joint military exercise on
7 September began in the central Slovak military training area at Lest,
TASR reported. Some 1,000 soldiers from the Czech Republic, Hungary,
Poland, Ukraine, Romania, and Slovakia are participating, while Austria
is attending as an observer. This is the first international military
exercise to be held in Slovakia. The Hungarian contingent the previous
day was detained for three hours at the Slovak border as customs
officials were reluctant to let the soldiers cross the border with
weapons in hand. -- Sharon Fisher, OMRI, Inc.
IMF TO DISCUSS STAND-BY DEAL WITH HUNGARY. An IMF delegation has begun
talks in Budapest on a stand-by agreement with Hungary, international
media reported on 6 September. The agreement would involve two separate
loans totaling $800 million, which Hungary plans to spend on budget
reform and structural changes. The delegation is to review Hungary's
economic stabilization program, a three-year economic strategy plan, and
next year's budget. Preliminary reports say that the IMF is satisfied
with Hungary's stabilization plan and its proposed budget deficit for
1996 of 258 billion forints ($1.9 billion), which would represent 3.9%
of GDP. One of the preconditions for a stand-by loan was setting the
deficit at a maximum of 3% of GDP. The IMF also wants monetary and wage
reform as well as further austerity measures in addition to those
adopted by the government in March 1995. -- Zsofia Szilagyi, OMRI, Inc.
MOLDOVAN PRESIDENT ON RESOLUTION OF TRANSDNIESTRIAN CONFLICT. Mircea
Snegur told Hungary's Duna TV that he is confident the Transdniestrian
conflict will "sooner or later" be solved by political means. He said
the Moldovan side will display "as much patience and persistence" as is
needed in order for Tiraspol to understand that "their intentions to set
up a confederation do not have a chance." Snegur said granting Gagauz-
type autonomy status to the Transdniestrian region would be "a fair
solution," Infotag reported on 7 September. -- Michael Shafir, OMRI,
Inc.
[As of 12:00 CET]
Compiled by Jan Cleave

Friday, 08 September 1995
Volume 2, Issue 173
BUSINESS NEWS
-------------
**BUDAPEST SEES MORE ON THE RICHTER SCALE**
The Hungarian privatization agency, APV, said it wants to sell
20 percent more of pharmaceutical giant Richter Gedeon in a
private placement. APV Spokesman Adam Dudits said this will
be the first phase of Richter's privatization. Right now, APV
owns about 62 percent of the company, other investors have 33
percent and employees own about 5 percent. Dudits said the
government wants the placement done before the end of the
year. But he won't say how much money the state hopes to
raise from the sale of the stake in Richter. Richter is the
biggest pharmaceutical company in eastern Europe. Dudits said
the placement will be led by Creditanstalt Securities and
the London-based investment bank Henry Schroeder & Company.
The government won't release information on further plans for
privatizing Richter. --David Fink
**HUNGARIAN NATIONAL BANK CLOSING LONDON OFFICE**
The National Bank of Hungary has announced it's going to stop
all the activities of the London-based Hungarian International
Bank by December 31 of next year. The bank issued a
statement yesterday saying the Hungarian International Bank is
solvent and will honor all its payment obligations.
**MARKET RIPE FOR HUNGARIAN LOAN REQUESTS**
The Hungarian National Bank said it'll have to tap
international capital markets for $1.5 to $2 billion next
year. The NBH's 1995 borrowing target was $1.5 billion. NBH
vice-president Frigyes Harshegyi said even though the NBH
fulfilled this year's borrowing requirements in June, it's
taking advantage of market conditions to secure advance
funding for next year. He said right now, the NBH has foreign
currency reserves of almost $8 billion which give the bank the
freedom to wait for ideal market conditions before issuing
paper. The bank's total borrowing requirement for 1996 will
be $3.5 billion but $1.5 billion will be covered by private
sector borrowing.
**BRNO HOSTS CEFTA MEETING**
Prime ministers from the four Central European Free Trade Area,
or CEFTA, countries will meet in the Czech city of Brno Monday
amid signs that all is not well in trade relations among the
former East Bloc states. All four CEFTA members: Poland,
Hungary and the Czech and Slovak republics, said they're
committed to rapid regional trade liberalization. But the
group hopes it won't be lumped into a post-Communist ante room
to the European Union. Right-wing Czech Prime Minister Vaclav
Klaus, who will host the meeting, is particularly eager to
concentrate CEFTA on breaking down trade barriers, not
politics. CEFTA members have already agreed to abolish many
existing tariffs and other impediments, but there have also
been growing protests within the group. Hungary has
complained that it has yet to realize the fruits of
membership. It ran a $113 million trade deficit within the
group during the first half of this year. It's CEFTA trade
deficit last year totalled $330 million. Meanwhile the Czechs
are fuming over Slovakia's recent decision to scrap tariffs on
small cars. That'll take away an advantage enjoyed by Czech
carmaker Skoda which alone had tariff-free access under a
customs union agreed when Czechoslovakia split in 1993.
Poland has pushed hard to broaden CEFTA membership, and said
it wants to develop a banking consortium to strengthen trade
between CEFTA countries. But there is one thing CEFTA can
agree on. They're expected to vote in Brno to add Slovenia to
its ranks. Trade ministers have already agreed to the
expansion in principle.
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(Elnezest az esetleges kisbetukert, de az eredeti szoveg csupa
nagybetuvel volt irva, amit at kellett cserelnem.)
Buchwald Amy
*****************************************************************
date=9/7/95
type=correspondent report
number=2-184928
title=Hungary / Buses / l
dateline=Barry Wood
byline=Prague
content=
voiced at:
Intro: The problem of industrial restructuring is common to all
the transforming economies of Eastern Europe and the former
Soviet Union. But as V-o-A's Barry Wood reports, Ikarus (ee kar
ooz) -- the big former monopoly bus producer in Hungary -- is
having a particularly tough time in restructuring.
Text: Travelers to the former east bloc have seen Ikarus buses,
even if they did not know it. The long, boxy articulated
Ikarus buses trundle through the streets of hundreds of cities
and towns in Eastern Europe and the former Soviet Union.
In its glory years in the late 1980's, Ikarus turned out 13
thousand buses a year at its Budapest assembly plant. This year,
production may not reach even two thousand. Employment has been
cut in half to five thousand, and still the company cannot make a
profit.
Ikarus is still largely in Hungarian government hands -- even
though Russians have a minority interest. The Hungarians hope to
have found a new buyer for Ikarus by the end of the year.
Laszlo Halpern is a professor of management at the Budapest
Institute of Economics. Mr. Halpern says this flagship of the
old socialist economy has to completely reinvent itself, if it
is to survive in a competitive world market.
//Halpern actuality//
Still, no major restructuring has taken place. So I
think Ikarus somehow needs a strategy, improvement of
product, and somehow to split up into smaller units.
And perhaps in this way they can catch up with
international tendencies and somehow survive. Otherwise
there is no hope.
//End actuality//
The problems of Ikarus are compounded by the fact it produced
mainly for the Soviet and East German markets -- both of which
have been lost. The Eastern Germans now buy their buses from
Western Germany and, although the Russians would like to buy,
they are short of money.
Professor Halpern says Ikarus may find itself in the unfortunate
situation -- even though it has cut production by two thirds --
it may still be producing too many buses for an increasingly
demanding and selective global market. ( Signed)
neb / bdw / wod/mmk
07-Sep-95 12:20 pm edt (1620 utc)
nnnn
source: Voice of America

(Elnezest az esetleges kisbetukert, de az eredeti szoveg csupa
nagybetuvel volt irva, amit at kellett cserelnem.)
Buchwald Amy
*****************************************************************
date=9/7/95
type=correspondent report
number=2-184926
title=Hungary / Econ / l-o
dateline=Barry Wood
byline=Prague
content=
voiced at:
Intro: Officials from the International Monetary Fund are in
Budapest -- holding detailed discussions with the Hungarian
finance ministry on the government's program to reduce the budget
and foreign trade deficits. V-o-A's Barry Wood reports the I-M-F
team is likely to be impressed by recent progress made by the
Hungarians.
Text: The I-M-F mission will be in Budapest for another week.
It is reviewing financial data and measuring initial results of
the government's austerity measures introduced last March.
Hungary has very large budget and trade deficits and needs I-M-F
money to avert financial difficulties. If the talks go well,
Hungary could begin receiving I-M-F credits before the end of the
year.
Hungary has a unique mixture of good and bad results from the
five-year transition from a state-controlled, communist economy.
On the positive side, foreign businesses have immense confidence
in Hungary's future. They have invested more than eight billion
dollars in this small, strategically located economy. That
amount is a stunning 33 percent of the entire foreign investment
attracted to Eastern Europe and the former Soviet Union.
On the negative side, Hungary's democratically elected government
inherited a 25-billion-dollar foreign debt, run up during the
communist period. In addition, a generous welfare system made it
difficult to control state expenditures, with the result being a
chronic budget deficit.
The measures introduced last March were intended to remedy the
problem and win the backing of the I-M-F. Welfare payments have
been scaled back; the retirement age raised to 62; a surcharge
levied on imports; and the currency sharply devalued. Thus far,
the measures seem to be working. The trade deficit is expected
to fall this year and the budget deficit, as a percentage of
output, is set to decline. (Signed)
neb/bdw/wod/cf
07-Sep-95 11:52 am edt (1552 utc)
nnnn
source: Voice of America